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In Post-Gulnara Uzbekistan, Another Russian Firm Targeted for Assets Grab

A cement company owned by Russian oligarch Filaret Galchev appears to have become the latest target of an assets grab by Uzbekistan’s government, sparking speculation that this is part of a re-division of economic spoils following the fall from grace of Gulnara Karimova, the daughter of President Islam Karimov.

A Tashkent court has ruled that the post-Soviet privatization of the Akhangarantsement company – owned by Galchev’s Russia-based Eurocement – way back in 1994 was illegal, and froze assets worth 414 billion sums (nearly $180 million), the company said in a July 29 statement.

The claims of illegal privatization “are of an unfounded and illegal nature, as was convincingly demonstrated in the court hearing,” it quoted Mikhail Skorokhod, Eurocement’s president, as saying.

The assault on the firm was quite sudden, he said: The company found out about the lawsuit brought by the government’s antimonopoly committee on July 16. Hearings started two days later, and on July 21 the court deemed the privatization illegal.

The ruling effectively places the firm – Uzbekistan’s second largest cement producer – back in the hands of the state, a full two decades after it was put into private hands in the post-Soviet privatization rush.

Eurocement – whose owner, Galchev, is Russia’s 24th richest man with a fortune of $6.1 billion, according to Forbes – acquired a 75-percent stake in Akhangarantsement in 2006 and now owns an 84-percent share, with the rest in the hands of minority shareholders.

Eurocement acquired its stake in Akhangarantsement from Zeromax GmbH, a company that once had extensive holdings in Uzbekistan and was linked to Karimova but ran into trouble in 2010 and was quietly broken up.

Karimova was once a powerful entrepreneur reported to control multimillion-dollar holdings in Uzbekistan. These days she is reportedly under house arrest in Tashkent, her business empire dismantled, and figures as a suspect in an international money-laundering investigation.

This link between Karimova, Zeromax, and Akhangarantsement is fuelling speculation that Eurocement’s troubles are part of a divvying up of lucrative economic spoils following her downfall.

Eurocement, which says it has always complied with Uzbek law, has pledged to appeal the Tashkent court ruling and take the case to the international courts.

It may wish to consider the experience of UK-based Oxus Gold, which remains locked in international litigation with Tashkent three years after pulling out of Uzbekistan amid what the company sees as a state-sponsored grab of its mining assets.

Tashkent denies such allegations and says investor protections are assured in Uzbekistan. But Eurocement is just the latest in a long line of foreign companies to run into trouble in the toxic investment climate.

Russian telecoms giant MTS was driven out in 2012, sustaining major losses (but is now mulling a return). Other victims include US company Newmont Mining and a host of Turkish and Asian investors.